As the self-pay patient population has expanded, so has the financial risk to hospitals. Hospitals no longer can count on payment from the traditional process of sending bills and placing unpaid accounts with collection vendors. Less obvious is the risk that frustrated, financially strapped consumers will delay care until their need is acute. In a fee-for-service environment, this behavior is detrimental to a patient’s health and results in less income for the provider. In a value model, it also jeopardizes a hospital’s performance and thus its payment.

An ongoing evolution of self-pay patients

Traditionally, the term self-pay referred to uninsured patients who paid for their health services out of pocket. Today, however, that term has given way to self-pay after insurance (SPAI), because the bulk of a hospital’s self-pay accounts typically comes from insured individuals in high-deductible health plans (HDHPs).

In 2016, 150 million Americans were insured by employers. The average deductible for those patients was $1,478—and at companies with between 3 and 199 employees, that figure exceeded $2,000. It is hardly a surprise, then, that covered individuals with very high deductibles increasingly resemble the uninsured in terms of the likelihood to pay, according to a March 2017 report from Crowe Horwath. After all, that deductible is theoretically coming from a population where nearly 70 percent have savings of less than $1,000.

Healthcare finance executives understand well the problem of collecting directly from patients who owe more than they expected to pay, or more than they have. They also recognize the drawbacks of relying too heavily on outsourced collections options. Hospitals must find better ways to address the issues that come with the growing self-pay landscape.

A sustainable solution to the problem must address both consumer willingness and ability to pay, and bring to bear technological, strategic, and human behavior insights to achieve the same type of seamless billing and payment process that consumers have come to expect from experiences with other industries. The Crowe Horwath report analyzes the “ongoing evolution of self-pay customers” and provides some key considerations.

Segmenting the self-pay landscape

Self-pay patients require greater flexibility from hospitals in terms of prioritization and the range of options they extend.

Although uninsured and high-balance patients have a repayment rate of 10 percent or less, these groups make up a small percentage of hospital billings. The average self-pay balance at a typical hospital is around $1,000. The likelihood of repayment of balances of $1,200 and under is about 40 percent, with a mix of patients paying in full and/or setting up a payment arrangement. To capitalize on this relatively high rate, hospitals need to automate their communication and offerings to the 40 percent who are paying their bills and engage differently the 60 percent who should be but, for whatever reason, are not. These small-balance accounts are the largest and most crucial segment for hospitals to address.

Responsive payment support

Segmenting patient balances is just the first step. To avoid the cascading consequences of avoided care, hospitals should accept the role of financial support partner for struggling patients. They should reach out to patients on the patients’ terms, shifting the mindset from "billing and collections" to "responsive payment support." Such support includes identifying the patient’s ability to pay before sending the first bill, offering a tailored range of payment plan options for those who qualify, giving patients the ability to view and pay bills via multiple channels (paper check, online, mobile), and proactively adding new balances to an existing monthly payment.

Studies of patient satisfaction show that a positive interaction with clinicians can be completely negated when patients' lasting memory is of a confusing and frustrating billing experience. Without a responsive, consumer-centric approach, that dissatisfaction can lead to avoidance of care that puts hospitals into a double-jeopardy scenario: diminishing payments from patients who get care, and then poorer clinical and financial outcomes from those patients who put off care because of cost.